In California, a life agent replaces an existing life policy but fails to provide the required replacement notice and comparison information to the applicant. This conduct:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's replacement rules, CIC Sections 10509 through 10509.09, require a life agent to provide the applicant with a signed replacement notice and comparison information and to submit the required forms to the insurer before the new policy is issued or delivered. The purpose is to ensure the applicant understands the costs and potential loss of values when replacing an existing policy. Failure to comply with these requirements can result in penalties and license discipline, and the insurer may refuse to recognize the replacement. The rules apply to every replacement, including same-insurer replacements and those with lower premiums. The signed disclosure forms are mandatory and cannot be waived by the applicant.
Why the other options are wrong
- A lower premium does not excuse the agent from the statutory notice and comparison requirements; the law protects the applicant regardless of the new policy's price.
- The replacement rules apply even when the old and new policies are from the same insurer, so a replacement within one company still requires the forms.
- The applicant's verbal consent cannot substitute for the signed statutory replacement forms, which must be part of the file.
Memory hook
Replace with paper or face discipline: the signed replacement notice is mandatory, no matter how good the deal.